Economy

Signaling shift to coal, EU explores alternatives to Russian supplies

However, emergency and temporary measures should not be confused with return of coal, energy expert says

Ebru Şengül Cevrioğlu   | 23.06.2022
Signaling shift to coal, EU explores alternatives to Russian supplies

IZMIR, Türkiye

The EU is likely to substitute Russian coal supplies with other major coal producers such as the US, Australia, Colombia and South Africa, given the bloc’s pivot towards coal with Russia cutting gas supplies and ahead of the August deadline to cut Russian coal imports. 

On June 15, Russian energy giant Gazprom said some technical equipment sent to the German firm Siemens for maintenance had not yet been returned and warned that gas shipments through the Nord Stream pipeline would fall.

It said that only up to 67 million cubic meters of gas per day could be provided through the pipeline as of June 16, marking a 60% reduction.

The Netherlands, Germany and Austria announced plans to put their coal plants into use to reduce gas consumption and replenish gas storage facilities.

However, the bloc has taken action against Russian coal with a proposed ban on coal imports effective from mid-August as part of its fifth package of sanctions on Russia over its war on Ukraine.

Scarce Russian gas supplies ahead of the coal embargo have pushed the EU to look for alternative sources in substitution for its number one coal supplier Russia.

Eurostat data shows that in 2020, Russia supplied more than half, at 55.6%, of the EU’s hard coal imports, followed by the US with 17.2% and Australia with 15.3%. Other important suppliers include Colombia, South Africa, Indonesia and Canada.

Russian metallurgical coal also accounts for between 20% and 30% of the EU’s coal imports, while the share of the EU’s imports of thermal coal from Russia totals almost 70%, according to Brussels-based think tank Bruegel analysis. Germany and Poland are particularly reliant on thermal coal from Russia.  

Coal stocks at 2.5-year high

Meanwhile, recent data compiled by Montel, an information provider for the European energy markets, showed a peak in coal inventories in Europe since January 2020.

Combined inventories at key Amsterdam, Rotterdam and Antwerp (ARA) terminals reached almost 6.5 million tons this week, according to Montel.

VesselsValue data compiled by Montel also showed that seven vessels had been shipped to the Netherlands, Spain and Poland this month from South Africa's Richards Bay export terminal, relative to only one to France last year.  

"EU should prioritize demand-side measures"

Marco Giuli, an associate policy analyst at the European Policy Centre (EPC), told Anadolu Agency that without Russian coal, the top coal supplier to the EU, accounting for almost 50% of EU imports in 2020, the EU will have to turn to other major suppliers – i.e. the US, Australia, Colombia or South Africa.

"Overall, replacing some amounts of gas with coal for power generation is expected to increase European emissions in the short term. However, we should not confuse an emergency, temporary measure with a return of coal," Giuli warned.

He suggested that this capacity can be easily withdrawn as conditions allow, adding that "it does not require long term commitments associated with long payback period and cumbersome infrastructure of new gas supply."

"Second, temporary reactivation of coal capacity is also expected to be kept in check by the EU emission trading system and by the fact that it will limit LNG reorientation towards Europe, and therefore the gas-to-coal switch in other countries – i.e. in South Asia," Giuli explained.

To further limit the impact on emissions, the EU should prioritize demand-side measures, he stressed.

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